RMD not taken in year of death
Client’s father passed away January 2015. There are 4 beneficiaries, all adult children. Deceased father had not taken his RMD for 2015.
Question: does the RMD need to be distributed from father’s account (IRA) prior to the 4 beneficiary receiving their share and beneficiary IRAs being established? Have received guidance from a CPA that this is the case otherwise subject to 6% penalty for rolling over RMD as excess contribution.
Permalink Submitted by Alan - IRA critic on Wed, 2015-02-18 17:29
No, the final RMD for the decedent only needs to be taken by 12/31/2015, and since it will be distributed to the beneficiaries in any combination the beneficiaries desire, the inherited IRA must be retitled before any distributions can be made. Since the IRA must be retitled, it only makes sense to create the separate accounts at that time. Obviously, if the beneficiaries choose not to take the RMD in proportion to their shares, they will have to coordinate that effort. The CPA is incorrect because non spouse inherited IRAs can only be established by direct trustee transfer which is not considered a distribution. Any distribution taken would be considered to apply to the RMD and no distribution, RMD or otherwise, can be rolled over.
Permalink Submitted by Jerod Wurm on Wed, 2015-02-18 22:08
So for clarity, does the decedent’s RMD need to come out of the IRA prior to establishing the Bene. IRAs and transferring the appropriate amounts to each beneficiary?
Permalink Submitted by Alan - IRA critic on Thu, 2015-02-19 02:50
No.